Gates a genius with friends in high places

ROGER FRANKLIN discovers, in the second part of his series on Bill Gates, that the Microsoft chief has a habit of bouncing back.

Just how Bill Gates proposes to deal with a wary market became increasingly clear this month in Las Vegas, the most appropriate place in the world for Microsoft to place its latest billion-dollar bet.

The secret weapon, unveiled with Hollywood hoopla at the Consumer Electronics Show, is a squat black parcel of wizardry called the Xbox that Gates believes will soon eclipse Nintendo, Sony's PlayStation and Sega's Dreamcast as the system of choice for video-gamers everywhere.

Set to hit stores within the next four months, the preview version of the Xbox drew raves from technical writers for what one termed astonishingly lifelike graphics.

Meanwhile, Microsoft's PR people were painting it as another example of their chief's genius. Just as Gates decided in the early 80s that Apple - then the undisputed leader in personal computing - had made a catastrophic blunder by refusing to license its proprietary operating system to hardware manufacturers, Microsoft's spinners insisted last week that the Xbox was the latest example of their master's gift for thinking far, far ahead of the pack.

Apple's mistake meant that only 40 million of its computers have been sold over the years - despite the fact that it is generally regarded as a far superior product. Meanwhile, the crash-plagued Windows has been installed on 1.3 billion PCs, Gates is worth around $US55 billion ($123 billion), even in a depressed market, and Apple founder Steve Jobs is stuck with convincing Wall St that his company's latest quarterly loss of $250 million is nothing worse than small change and really not worth worrying about.

As a stopgap moneyspinner until the wireless internet gold rush that Gates anticipates gets under way in earnest, the Xbox is supposed to keep revenues flowing. But what of its competitors - one of which, Sega, is already having troubles holding its own in a crowded market?

In an example of the arrogance that so infuriated Judge Thomas Jackson, Gates shrugged off the established market leaders as also-rans. His product, he said, represented such a quantum leap that rivals would be obsolete the moment the first Xbox left the factory.

As for Windows 2000, which hardly moved off the shelves for the first nine months after its release early last year, Gates insisted that its future was also bright - despite being reminded in Las Vegas that one prominent programmer dismissed it as "the biggest train wreck in corporate history." That opinion, however, now seems to be receding as prominent Wall St analysts change their tunes.

Lehman Brothers analyst Michael Stanek, for example, sees Windows 2000 as a classic sleeper - one now poised to pounce on the market for network operating systems. Its key advantage, he points out, is that it can handle all the old familiar Windows chores - word processing, spreadsheets, navigating cyberspace - as well as boasting the ability to run an internet server, a task formerly assigned to an entirely different program, Windows NT.

Now that Windows 2000 has been on the market for a full year, techies wary of buying a lemon have had their doubts allayed and are turning to Gates' product in increasing numbers.

"Is it the most important programme in the history of humanity, which is how Microsoft presented it? No, it isn't," said Stanek. "Will it lift Microsoft's earnings? I believe it will, substantially." In Stanek's view - one that is gaining ground on Wall St - the company's stock could well be back to near its all-time high by year's end.

So, what's the point? After all, if all those pieces click, a fat and healthy Microsoft would present an even larger and more tempting target for Judge Jackson's cleaving axe. Here is where Gates' grand strategy takes on a truly Napoleonic talent for improbable victory - one where success would seem to depend on two particularly potent allies.

The first is President-elect George W. Bush, who has reasons both philosophical and practical to consider Gates a friend. To learn why, and to see just how much it costs to buy the affection of a US leader these days, curious readers might care to fire up their browsers and log on to www.opensecrets.org - a public-interest research group that picks through official listings of campaign donations and spells out just who gives how much to whom. Key in Microsoft at the opensecrets.com site and three full pages of Gates' senior executives and their contributions fill the screen.

Al Gore's friends at Microsoft, by contrast, are fewer in number and seem to have given much, much less. That this should be the case is scarcely surprising since it was the Clinton-Gore Administration that launched the anti-trust suit in the first place.

Nor was that anywhere near the full extent of Microsoft's help to Republicans.

Factor in its support Microsoft extended to Washington State Republican Senator Slade Gorton in what turned out to be a narrow defeat in his bid for re-election, and it requires no great deductive leap to conclude that the Bush Administration will be most unlikely to give the Justice Department's anti-trust lawyers a second crack at Gates if Judge Jackson's original decision is overturned on appeal.

Oh, yes, there is one other reason Bush might like to see Jackson's ruling overturned: the hired-gun lawyer whom the Justice Department took on to lead its case was none other than David Boies - the very same attorney last seen attempting to convince the US Supreme Court that George W. Bush had no right to the presidency.

While Bush is not said to be a vengeful man, only a saint in his position would not enjoy seeing a bitter foe's greatest legal triumph overturned.

And that, thanks to the timely arrival of Microsoft's second vital ally, Washington lawyer Carter Phillips, is beginning to look ever more likely - in no small part because of Judge Jackson's very own big mouth.

Phillips, who was taken on as Microsoft's lead counsel for its appeal after four tortuous months of trying to thrash out a negotiated settlement with the department ended in failure last June, has taken the unusual step for a top lawyer of openly lacerating Judge Jackson.

Judge Jackson's behaviour at the trial was nothing less than bizarre, the $800-an-hour Phillips said during one of his attacks on Jackson, whom he also accused of acting like an awestruck groupie whenever Boies cleared his throat.

"There is not a court in the country that would uphold these remedies," Phillips said of Judge Jackson's order that Microsoft be cut in two - one half taking the Windows business, and the other getting everything else.



Nor is Phillips alone in predicting that he can drag Gates' fat out of the fire. "The strategy is to say the entire proceedings were infected with bias and bad judgment," predicted George Washington University law professor William Kovacic, one of America's leading authorities on anti-trust law.

In Kovacic's view, Judge Jackson's errors during the original trial were compounded by his garrulous comments to the New Yorker.

"Now, I think the odds that Microsoft will be split up are one in 10," he said.

If Kovacic's bookmaking proves correct, those odds represent yet another irony - one in which a student of history like Jackson might well recognise one more Napoleonic echo. As the judge probably knows, it was the Corsican upstart who said that good generals were fine and lucky generals even better.

But the best of all, according to Napoleon, were those commanders who did not start shooting until the odds of victory were 90 per cent in their favour.

If only Napoleon had someone like Gates on his team at Waterloo.